Sports gear maker Under Armour halves sponsorship commitments

Under Armour slashed its sponsorship commitments by roughly half in 2020, as the sports gear company ended expensive outfitting contracts amid the coronavirus pandemic.

Total sports sponsorship obligations for the company fell 47 per cent to $362m in 2020, down from $679m in 2019, according to a regulatory filing published on Wednesday.

The details on the reduction in those commitments — which include marketing contracts for the current year and beyond with professional sports teams and leagues, big university departments and star athletes — illustrate how Under Armour has stepped back from its ambitions as an on-field outfitter in elite sport.

Last summer, the company became one of the most prominent consumer brands to invoke a force majeure clause due to the pandemic, ending its outfitting deals with the sports departments at the University of California, Los Angeles, and the University of California, Berkeley — two of the most expensive in all of US collegiate sport, totalling more than $360m.

Weekly newsletter

Scoreboard is the Financial Times’ new must-read weekly briefing on the business of sport, where you’ll find the best analysis of financial issues affecting clubs, franchises, owners, investors and media groups across the global industry. Sign up here.

The company was trying to reduce and “get out of some of the longer-term contracts that we weren’t receiving much of the benefit [from],” said David Bergman, Under Armour chief financial officer, on an earnings call this month.

“That allows us to have kind of a bigger war chest, to be nimble on a marketing front going forward and making sure we’re deploying that marketing in the areas of highest return,” he added.

This month, the company confirmed it would end its on-field licensing agreement with the National Football League, a symbolic move that will restrict athletes in the most popular professional American sport from wearing gear with Under Armour’s logo during games.

It was not immediately clear whether the value of that contract was reflected in the reduction in sponsorship obligations included in Wednesday’s filing. A spokeswoman for Under Armour did not have an immediate comment.

Under Armour recorded $473m in restructuring and impairment charges during the year ended December 31. Roughly $79m of that was earmarked for “contract exit costs”, according to the filing. 

While specific sponsorship obligations have fallen sharply, Under Armour’s overall marketing costs as a percentage of sales rose slightly, from 11 per cent in 2019 to 12.3 per cent in 2020. 

Nike, the sportswear industry leader by total revenues, has not yet released comparable financial performance figures through to the end of calendar year 2020. As of its fiscal year ended in May 2020, Nike owes $9.3bn in total future endorsement obligations, down 8 per cent from the previous year.

Under Armour has taken new direction since Patrik Frisk took over as chief executive at the beginning of 2020. Since taking the reins, he has sought to lift the Baltimore-based company out of a multiyear restructuring, winding down other costly investments like connected fitness apps and focusing more on developing performance gear.

Source link

Related Articles

Back to top button